Its business is predominantly a taxi charge account system allowing customers to pay via credit card for their tax trips for a servicing fee.
CAB also has two affiliate businesses; UK-based account, booking and dispatch services provider, Cityfleet (49%-owned), and Australian-based commuter bus operator, ComfortDelGro (49%-owned).
In a major blow for the company, Victoria’s government announced in late May 2013 that it intended to limit the industry credit card servicing fee from 10% to 5%.
CAB’s FY13 taxi service fee income came in at $90.7 million, with Victoria representing around half of total revenue.
A 5% reduction in the servicing fee therefore takes a huge chunk out of Victoria’s contribution to taxi service fee income.
Policy uncertainty is another issue impacting the outlook, with NSW and Queensland saying they too will consider a 5% cap on servicing fees.
If these two states follow Victoria’s lead it would result in a greater hit to taxi service fee income, further eroding CAB’s profitability.
CAB is facing increased competitive threats from Uber, which is a private car hire booking app.
Uber’s UberTAXI service (currently available in Sydney) connects passengers with licenced taxi drivers who are also using Uber.
UberTAXI is also a cheaper way to book a taxi. The only fees involved are a $2 booking fee and no credit card surcharge, undercutting CAB, which charges a 5% fee.
Uber is backed by major international companies like Google and Goldman Sachs. It can therefore invest in technology to help it win market share, and leverage existing systems to operate at lower cost than CAB.